Exam 13: Budgeting and Standard Cost Systems

The treasurer of Unisyms Company has accumulated the following budget information for the first two months of the coming year: \ 520,000 \ 450,000 Sales 350,000 290,000 Manufacturing costs 46,400 41,400 Selling and administrative expenses - 250,000 Capital adchitions The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs are expected to be paid in the month in which they are incurred and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the probable monthly selling and administrative expenses. Insurance is paid in February, and a $40,000 installment on income taxes is expected to be paid in April. Of the remainder of the selling and administrative expenses, one-half are expected to be paid in the month in which they are incurred, with the balance paid in the following month. Capital additions of $250,000 are expected to be paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are composed of accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $20,000. Prepare a monthly cash budget for March and April.

The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.

Which of the following would not lend itself to applying direct labor variances?

For February, sales revenue is $250,000; sales commissions are 6% of sales; the sales manager's salary is $50,000; advertising expenses are $15,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $1,000 plus 1/2 of 1% of sales. Total selling expenses for the month of February are:

Efficient Corporation uses a standard cost system. The following information was provided for the period that just ended: \ 11.75 Actual price per gallon 5,000 Actual gallons of material used \ 17.00 Actual hourly labor rate 24,300 Actual hours of prochuction \ 12.00 Standard price per gallon 1/2 Standard gallons per completed urit \ 12.00 Standard hourly labor rate 3. Standard time per completed urit 9,000 Units completed churingthe period Refer to the information provided for Efficient Corporation. The direct labor rate variance is:

Department managers plan lower goals than possible in order to build in a cushion for unexpected events. This result in:

As a device for measuring efficiency, standard cost systems enables management to determine the causes of differences between what a product should cost and how much it actually costs to produce.

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the time variance was $1,500 favorable.